Jan 9, 2008 | 16:27 GMT

4 mins read

Serbia: Caught Between the East and the West

Ahead of the decisive Serbian Presidential elections on Jan. 20, rumors out of Serbia suggest that nationalist Prime Minister Vojislav Kostunica and pro-Western President Boris Tadic have made a crucial deal that will determine the fate of their parliamentary coalition. The deal makes political sense in the short term — it will keep the ultra-nationalist Radicals out of power — but in the long run, the alliance between Kostunica and Tadic is unsustainable.
Rumors out of Serbia, reported by the Serbian daily Blic late Jan. 8, suggest that conservative, pro-Russian Prime Minister Vojislav Kostunica and liberal, pro-Western President Boris Tadic have made a deal ahead of the country's key presidential elections, slated for Jan. 20. As part of the deal, Tadic will allow the sale of state-owned oil company Nafta Industrija Srbije (NIS) to Russia's Gazprom, and Kostunica will agree to the signing of the Stabilization and Association Agreement (SAA) with the European Union on Jan 28. Kostunica is pushing for the sale of NIS to Gazprom in order to shore up Belgrade's geopolitical alliance with Moscow. He hopes to meet Russian President Vladimir Putin in Sofia, Bulgaria, on Jan. 18 and sign the deal there. If Kostunica fails to deliver NIS, Moscow could reconsider its stance on more important Serbian issues (namely, Kosovo), or at the very least look for a Serbian politician who can deliver on his promises — perhaps the Radical Tomislav Nikolic. Tadic and his ally from the pro-West G17 party, Economy and Regional Development Minister Mladjan Dinkic, oppose the deal with Gazprom. Management positions in Serbian state-run enterprises are divided among coalition parties like ministry posts, and Tadic’s Democratic Party currently runs NIS. Thus, if NIS is sold to Gazprom, Tadic's party will lose what is widely considered Serbia's prime state-run enterprise. Dinkic is personally lobbying for the sale of NIS to Austrian state-run energy company OMV and is quite annoyed that NIS will not be put on the public auction block to attract the highest bidder. Rumors from Serbia and Russia suggest that Moscow sent a direct warning to Dinkic and his pro-Western allies when Federal Security Service agents raided Euro Axis, a Dinkic-linked bank headquartered in Moscow. This likely was a shot across the bow to all Serbian politicians opposed to the NIS sale, letting them know that Russia's alliance with Serbia is not unconditional. Reports from Belgrade media on Jan. 9 also suggest that Moscow is upping the bid for NIS to silence critics of the sale, offering $2 billion instead of the initial $900 million and promising Belgrade that the branch of the South Stream pipeline that goes through Serbia will be a major one. The second part of the deal — Kostunica agreeing to the signing of the SAA with the European Union on Jan. 28 — would give Tadic a serious boost ahead of the presidential election's second round, slated for Feb. 3. Despite his increased anti-EU rhetoric, Kostunica understands that his voters do not share the level of antagonism toward Brussels found among the Radical constituency. Kostunica can get points among his supporters for firmly standing up to Brussels, but a clean break with the European Union would be the "nuclear option." Belgium and the Netherlands have indicated that the European Union could end up postponing the signing of the SAA because of Serbia's failure to arrest the fugitive Gen. Ratko Mladic. If that happens, Tadic will appear weak; he will look like a pro-Western candidate who cannot secure any actual favors from the West, while Kostunica will be able to claim that he refused to simply lie down and roll over for Brussels. (It should be noted that Kostunica and Tadic still have time to backstab one another — which is just about the only thing their coalition seems to facilitate effectively — before the second election round Feb. 3.) Tadic and Kostunica are likely to make some sort of arrangement to preserve a status quo that personally benefits each of them but is ultimately an unsustainable alliance between a liberal, pro-Western president and a nationalist, pro-Russian prime minister. The foreign policy generated by this uneasy alliance is ultimately schizophrenic and is tearing Serbia apart. At some point, Serbia will have to choose between Russia and the West. Otherwise, Russia will continue to be frustrated by Tadic's outwardly pro-EU position, while the European Union will be annoyed at all of Serbia's state enterprises slipping into Moscow's control and could sour on the idea of bringing a Russian-dominated economy into the common market. This puts the European Union in a Catch-22: It must bring Serbia into its fold to assuage Belgrade's loss of Kosovo, but by doing so it could end up bringing a Russian-dominated economic — and possibly political — entity into the EU.

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